LONDON: Sterling rose against the dollar on Tuesday as strong jobs data supported the prospect of a Bank of England rate hike, but fell against the euro which was boosted by optimism around talks between Russia and Ukraine.
Britain’s unemployment rate fell more than expected to 3.9% in the three months to January, official figures showed, while vacancies hit a record high in the three months to February.
Sterling had risen 0.2% against the dollar to $1.3021 by 0925 GMT, after touching $1.3000 in Asian trading, its lowest level versus the dollar since November 2020.
“This morning’s UK jobs report…continued to signal tightness in the labour market and accelerating wage-growth dynamics, which support the prospect of another hike by the Bank of England on Thursday,” said Francesco Pesole, FX Strategist at ING.
Money markets are fully pricing in a 25 basis points BoE interest rate hike on Thursday.
Versus a strengthening euro, sterling fell to a five-week low and was last 0.4% lower at 84.45 pence, with the single currency benefiting from lower oil prices as ceasefire talks between Russia and Ukraine eased some fears of further supply disruptions.
Ukraine’s President Volodymyr Zelenskiy said late on Monday that negotiations with Russia will continue on Tuesday.
Analysts agree European currencies remain mostly driven by sentiment around the Russia-Ukraine war, with the euro set to benefit the most from any resolution of the conflict.
“The recent optimism can help GBP/USD avert a break below the key $1.3000 support but will likely continue to put upward pressure on EUR/GBP, given the euro’s higher beta to the conflict,” Pesole said.
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